Bangko Sentral Governor Amando M. Tetangco Jr. is confident the country’s “underlying growth story remains intact” even as risks from external front rise this year.
In his speech before the “Tuesday Club” forum of journalists at the EDSA Shangri-La on Tuesday, the central bank chief described 2016 as full of “tail events” or “fat tails”, which he described as a situation wherein “the bell curve (which is normally nicely-shaped) is skewed.”
”This indicates that events, which are normally “rare”, occur with more frequency,” he said.
”What is quite remarkable is this – despite all the tail events, the Philippine economy continued to perform well in 2016,”he said.
Tetangco cited that despite negative external developments, the domestic economy posted the highest expansion print in the region in the third quarter of 2016 with a 7.1 percent growth, as measured by gross domestic product.
Inflation, or rate of price increases, remains low, with the 2016 average at 1.8 percent, below the government’s two to four percent target.
The banking system remains sound and stable and players are still very liquid, profitable and enjoy strong balance sheets.
The country’s external payment position remains robust with foreign reserves hitting USD81.05 billion as of end-December 2016.
Tetangco said these factors enabled the country to remain resilient, due mainly to reforms implemented in the past years such as the hike in the value added tax (VAT) to 12 percent, the positive demographics, and independence of the central bank.
”We are therefore entering 2017 with solid buffers. And we certainly need these, given the risk that we anticipate going forward,” he said.
This year, risks include the financial market volatility because of “many second-round implications, he said, referring to the decisions of the Federal Reserve, asynchronous policy in advance economies, oil prices developments, and populism and multilateralism policies in the US and Europe.
Tetangco pointed out that “the operating environment has indeed become more difficult.”
“Noise and global economic developments are creating financial market volatility, which is complicating policy formulation and implementation. Nevertheless, our underlying growth story remains intact, and the support of economic policies continues to be strong as well,” he said.
“We hope that you who actually write the news and determine what gets printed and talked about will help us put this story front and center,” he added.